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Tips for Escaping the Resource Sector Swamp Alive

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Posted by John Kaiser via The Mining Report

on Wednesday, 15 October 2014 07:23

Crocodile580by John Kaiser: What if the goldbugs are wrong and fiat currency isn't going to throw the world into hyperinflation? What if, instead, a steadily growing economy and a new awareness of the importance of having security of supply for critical metals, along with a big exciting discovery that heats up the resource sector, are what pull sinking gold and silver prices and their related mining companies out of the muck? If so, John Kaiser tells The Mining Report that he has set his sights on the dozen companies that would star in this horror-turned-romantic epic adventure.

The Mining Report: At the Cambridge House Canadian Investment Conference in Toronto, you talked about escaping the resource sector swamp. Why do you call the current market a swamp?

John Kaiser: There are four key narratives that dominate the resource sector, in particular the junior resource sector. One is the supercycle narrative where a growing global economy catches the mining industry off guard with the result that higher-than-expected demand results in higher real metal prices. That then unleashes a scramble to find deposits that work at these higher, new prices and put them into production. The juniors played an extraordinary role during that cycle in the last decade; however, global economic growth has slowed. Therefore, we are looking at a period of sideways, possibly weaker, metal prices for a number of years, which puts the supercycle narrative on hold. That is one factor keeping the sector in a swamp.

Another important narrative is the goldbug narrative, where a soaring gold price is going to make deposits much more valuable. We did see that play out. Gold reached $1,950/ounce ($1,950/oz) briefly, but has since retreated 40%. Even though that's still 400% off the low from just over a decade ago, it has turned out to be a wash in real prices. Now, growth projections in the U.S. are having negative implications for the prevailing apocalyptic goldbug narrative. That does not bode well for an escape from the quagmire.



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Asset protection

Don't Get Ruined by These 10 Popular Investment Myths (Part VI)

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Posted by Elliott Wave International

on Tuesday, 14 October 2014 05:13

Interest rates, oil prices, earnings, GDP, wars, peace, terrorism, inflation, monetary policy, etc. -- NONE have a reliable effect on the stock market

You may remember that after the 2008-2009 crash, many called into question traditional economic models. Why did they fail?

And more importantly, will they warn us of a new approaching doomsday, should there be one?

This series gives you a well-researched answer. Here is Part VI; come back soon for Part VII.


Myth #6: "Wars are bullish/bearish for stocks."
By Robert Prechter (excerpted from the monthly Elliott Wave Theorist; published since 1979)

... If the stock market is not reflecting macroeconomic realities, what else could it possibly be doing? Well, how about political news? Maybe political events trump macroeconomic events.

It is common for economists to offer a forecast for the stock market yet add a caveat to the effect that "If a war shock or terrorist attack occurs, then I would have to modify my outlook."

For such statements to have any validity, there must be a relationship between war, peace and terrorist attacks on the one hand and the stock market on the other. Surely, since economists say these things, we can assume that they must have access to a study showing that such events affect the stock market, right?

The answer is no, for the same reason that they do not check relationships between interest rates, oil prices or the trade balance and the stock market. The causality just seems too sensible to doubt.

Claim #6: "Wars are bullish/bearish for stock prices."

Observe in the form of this claim that you have a choice for the outcome of the event. Economists have in fact argued both sides of this one. Some have held that war stimulates the economy, because the government spends money furiously and induces companies to gear up for production of war materials. Makes sense.

Others have argued that war hurts the economy because it diverts resources from productive enterprise, not to mention that is usually ends up destroying cities, factories and capital goods. Hmm; that makes sense, too.

I will not take sides here. We can negate both cases just by looking at a few charts.

Figure 11 shows a time of war when stock values rose, then fell.

35458 a

 



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Asset protection

“Unimaginable Consequences” for Hong Kong

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Posted by Martin Weiss PH.D - Money & Markets

on Sunday, 12 October 2014 14:17

Unimaginable consequences?

These are not my words. They’re the words of the People’s Daily, the leading voice of the Chinese Communist Party. And they’re not a forecast or a speculation.

They’re a thinly-veiled threat!

In a moment, I’ll explain what I think those consequences might be — for the world and for you. But first let me give you a sense of how important this is and why I’m qualified to opine.

Hong Kong is the biggest financial center of the largest, most populous, fastest growing continent on the planet — Asia.

Only two other centers eclipse Hong Kong in power and size — New York, the financial capital of the world’s dominant superpower; and London, the center of the greatest empire in history.

Hong Kong’s banking, stock market, bond market and derivatives market are bigger than those of Frankfurt (the largest financial center of continental Europe) and of Tokyo (despite a national GDP that’s 22 times larger).

Tens of thousands of corporations, operating all over Asia, are incorporated in Hong Kong.

Over 1,600 companies, half based in mainland China, are listed on the Hong Kong Exchange.

And no matter what, if you want to do business in Asia, you almost invariably must go through Hong Kong.

I know from personal experience.

Screen Shot 2014-10-12 at 1.58.18 PMIn the early 1980s, I was working in Tokyo as a stock analyst for Wako Sh?ken, one of Japan’s larger brokerage firms.

And soon after I began there, my boss sent me off to Hong Kong for a project with their local subsidiary.

My task was to develop presentations about Japanese stocks, while interpreting from Japanese to English and to Cantonese. (They overestimated my linguistic abilities.)

Even back then, business at their Hong Kong subsidiary was a big deal for them — bigger than their subsidiaries or branch offices in New York, London, Dubai and a half dozen other centers. And that was 35 years ago, before Hong Kong’s meteoric expansion!

Why? Because of one single, powerful force that has propelled Hong Kong’s growth:

Freedom.

Freedom to trade, freedom from taxes, freedom from regulations, and above all, freedom from political interference or manipulation.

The authorities in Beijing seem to understand this — so much so that they’ve pursued something similar for Shanghai and other Chinese cities (within strict limits, of course).

What they don’t yet seem to understand is this: Economic and financial freedom cannot forever co-exist with political and social repression.

The Rise and Fall of

“Peaceful Co-Existence”

This is also an extremely important issue. So let me give you a quick overview.



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Asset protection

Yield-Hungry Baby Boomers Are on a Death March

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Posted by Dennis Miller - Millermoney.com

on Thursday, 09 October 2014 14:36

Today’s forecast: yield-starved investors forced into the market by seemingly permanent low interest rates will continue to be collateral damage. For some, that collateral damage may involve more than the loss of income opportunities… many could be wiped out completely.

I asked the participants in a discussion group: “If there were safe, fixed-income opportunities available paying 5-7%, would you move a major portion of your portfolio out of the market?”

They all answered a resounding, “Absolutely.”

Participants relying on their nest eggs for retirement income said they felt forced into the market for yield. Their retirement projections weren’t based on 2% yields, the rough rate now available on fixed-income investments. They’d planned on 6% or so. What other choice do they have now?

The Federal Reserve knows seniors and savers are collateral damage. Former Fed Chairman Ben Bernanke has openly acknowledged that the Fed’s low-interest-rate policy is designed to prompt savers to take more chances with riskier investments. In their book Code Red, authors John Mauldin and Jonathan Tepper shine a harsh light on that policy, writing:

Central banks want people to take their money out of safe investments and put them into risky investments. They call it the “portfolio balance channel,” but you could call it “starve people for yield and they’ll buy anything.”

I have to agree with Mauldin and Tepper.

The collateral damage inflicted upon seniors and savers is twofold. First, it’s the loss of safe income opportunities. The Fed’s low-interest-rate policies have saved banks and the government an estimated $2 trillion in interest alone. $2 trillion added to the balances of 401(k) and IRA accounts would sure bolster a lot of desperate retirement plans.

But there’s no sign the Fed will reverse its low-interest-rate policies in the foreseeable future. So, yield-starved investors, including throngs of baby boomers maturing into retirement age each day, play the market and risk their nest eggs in the process.

The Federal Reserve has succeeded in forcing savers to take billions of dollars out of fixed-income investments to hunt for better yields. Take a look at the chart below showing the S&P 500’s performance since 2004. The Index has almost tripled since its 2009 bottom. There hasn’t been a major correction in well over 1,000 days.

Screen Shot 2014-10-09 at 2.16.56 PM

When the bubble burst in 2007, the S&P took a 57% drop. I had friends just entering retirement who suffered



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Asset protection

US Stock Mkt Now Very Close to Another Historic Crash

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Posted by Arabian Money

on Wednesday, 08 October 2014 07:14

7011p-stockten-days-that-shook-the-nation-stock-market-crash-of-1929-posters-243x175US stock markets tumbled again yesterday as the recent sell off gathers speed. Traders note that the markets are now very close to their 200-day moving averages and when those are passed there is every possibility of a major crash for the most overvalued equities in the world whose internal support has been hollowed out over the past year.

After the falls on Tuesday the Dow is under 200 points away from the 200-day moving average trigger line, and the Nasdaq is even closer to this tripwire with 90 points to go. Automated selling could turn into a market panic to get out at this point.

Exhausted rally

The long rally is exhausted. The QE3 money machine is coming to an end. Where are the buyers going to come from now? Besides the small caps have been selling down for ages. This is a hollow shell of a market just waiting for the big guys to join the rout.



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